Watch: Support for small businesses

During the summer recess, I took the opportunity to visit a number of small businesses in my constituency to discuss issues of importance to them. For many of these businesses Brexit was not the most important issue, it was the current system of VAT and business rates. 

Currently the VAT threshold stands at £85k, therefore any business whose turnover goes over this amount must register for VAT and apply it to their goods and services.  In many cases they cannot pass on the VAT to their customers as a 20% increase in their prices would result in customers looking elsewhere for a better deal. This means that their profits immediately drop by 20%. Businesses tell me that the VAT threshold is a real barrier to their growth, many deliberately reduce their trading to ensure that their turnover remains below £85k. This is not good for the local economy.

Local businesses also told me that they would like to see a tapering the rate for VAT for turnovers between £85k to £115k. This would increase their incentive to grow turnover above the threshold as they will no longer suffer from a sharp drop in income when they do. As a result of their growth, net income to the Treasury would increase and the local economy would benefit.

It is vital that the government does all it can to encourage the small and medium-sized businesses to grow to increase local employment opportunities. I spoke during Questions to the Treasury about the need to support small rural businesses.

Watch below:




Huw Merriman

"I welcome all of the Treasury team to their places and thank the former Chancellor, my right hon. Friend the Member for Runnymede and Weybridge (Mr Hammond), for letting me work so closely with him. It was an amazing privilege.

"I spent an amazing day with my constituency businesses in the village of Beckley. They are concerned about business rates, on which I support their call for reform, as well as about the VAT threshold and lack of taper. They will also now be writing to me about the welcome increase to the national living wage. Can we do more to support small businesses? They are the backbone of rural economies and without them we will not have employment."

Mr Clarke

"I thank my hon. Friend for his question and take this chance to thank him, on behalf of the Government, for the work he did with the former Chancellor. He is quite right to talk about tax reform. ​Of course, since 2016 we have announced business rates reforms and reductions worth more than £13 billion by 2023-2024. On VAT, in the run-up to the 2018 Budget we consulted on the threshold, which is the highest in the EU and the OECD. We have committed to keep that in place until 2022, but I am genuinely always interested in suggestions that I can discuss with colleagues."